State health regulators have slashed proposed rate increases for health insurance in 2015, with some rates coming in as much as 14 percent below what health plans had hoped.

Across the state, rate increases were held 6 percent on average for individuals; and below 7 percent on average for small groups - far lower than those proposed in June. Now health plans have to figure out how to adjust their products, and whether they’ll need to find other ways to balance their books.

The reductions were significant in some cases: Excellus Healthcare, the parent of Univera Healthcare, will see individual rates increase by 9.23 percent, versus the 19.59 percent hike requested; and for small groups, rate increases were approved at 12.2 percent versus the 16.45 percent requested.

For Western New York insurers, HealthNow NY Inc., the parent of BlueCross BlueShield of WNY, individual rates were approved at 1.41 percent, reduced from the 7.24 percent requested; while small group rates will see a decrease in rates of 2.31 percent, even lower than the decrease requested of 1.82 percent.

Independent Health was approved for a 2.8 percent increase for the small group market versus the 4.35 percent rate increase requested. Its sister company, Independent Health Benefits Corp. was approved for an increase of 3.87 percent for small groups, versus the 5.44 percent increase requested. For individual rates, the state approved a decrease in rates by 2.01 percent for IHBC versus the 5.44 percent increase requested.

Response from the health plans was mixed, with some minimizing the impact by pointing to the fact that individuals and small groups account for a fraction of their overall membership. At Univera, just under 10 percent of its 125,000 members fall into those two categories, with the rest covered under large group plans.

Benjamin Lawsky, state superintendent of financial services, trumpeted the rate reductions in a media press release, saying rates for individuals will continue to be more than 50 percent lower on average than they were two years ago, before the implementation of state health exchanges brought about by the Affordable Care Act.

“We closely scrutinized the proposed rate increases insurers requested and reduced them significantly where appropriate,” he said. “While we have made substantial progress in reforming our health care market and holding down costs, there is much more work ahead. We will continue to engage with consumer groups, insurers, providers, and other stakeholders as we move forward with that effort.”

But the industry called the process flawed, warning it could cause some health insurers to reduce their product offerings or even leave the New York marketplace altogether.

“DFS’s decisions are irresponsible and do not reflect actuarial reality,” said Paul Macielak, president and CEO of the New York Health Plan Association. “The bottom line is inadequate rates will result in reducing product choice or otherwise de-stabilizing the market, which is ultimately harmful to the health care system as a whole and the to consumers who rely on it.”

Though they’re accustomed to adjusting rates because of the state’s pre-approval laws, many health plans were largely caught off-guard by changes in the process this year. Typically, there’s some back and forth between health plans and DFS, with the state providing some justification for changes, after which the plans have some time to recalculate rates on individual products before final submission and approvals.

This time around, DFS issued a press release the same day it sent health plans the approved rates, which came with no narrative or justification and gives the plans just one day to respond.

Julie Snyder, HealthNow director for corporate relations, said though there’s always some give and take, the process for determining rates is extremely complicated that involves analysis of medical claims and trends for its membership - a process that’s not taken lightly.

“When we file our rates each year, there is an incredible amount of discipline and rigor that goes into our rate filings,” she said. “It is a science, and those rates are filed in the interest of being competitive, meeting MLR requirements and complying with the Affordable Care Act mandates.”

It’s unclear exactly how the reduced increases will affect the health plans, or their pricing for large group plans. Some of the difference could be made up in higher increases for commercial plans insured through large group plans, or from the health insurers’ reserve funds. Or it could come through administrative cuts to the workforce.

“We are still evaluating the impact of the state’s adjustments for each of our products,” said Frank Sava, a spokesman for Independent Health, who said its proposed rate adjustments were the lowest in years and were below the state average for individuals and small groups. “The rate adjustments we submitted were actuarially sound and in line with medical costs.”

According to DFS, the average rate hike requested by insurers statewide for individuals was 12.5 percent, which was reduced more than in half to 5.7 percent. And for small groups, insurers requested rate increases that averaged 13.9 percent, which was reduced to an average increase of 6.7 percent. Both figures come in below the 8 percent approximate increase in health care costs.

The rate reductions also applied to individuals covered by government health plans like Medicaid and Child Health Plus: Fidelis Care was approved for an increase of 3.23 percent, versus the 7.14 percent increase requested for individual plans.

Tracey Drury covers health/medical, nonprofits and insurance

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